Finance Minister lashes out at Receiver’s focus on old debts – Tuitt hints at tax increase

POSTED: 10/18/12 12:32 PM

St. Maarten – “The draft budget for 2013 has been forwarded to the Cft but there are some issues that have to be taken care of. One of the main issues is that we have old debts; we have to look for a solution for them because if we don’t then all of those old debts will have to be processed in the budget of 2013, which is a total headache.”
Those were the opening remarks by Finance Minister Roland Tuitt before fielding questions whether the government would now look to increase taxes to appease its financial woes like the 30 million guilder deficit he revealed yesterday.
“If we look at the operation of government over the past three years then in 2009, 2010, 2011, you will know that all those three years closed off with a budget deficit of over 30 million guilders. In 2010 we had like a windfall because of the debt relief that was given by Holland and we used that money to pay off the debt with Apna to the tune of 65 million guilders. That gave us a book profit of some 30 million. It remains a fact then that the operational cost of St. Maarten is 30 million guilders higher than is being budgeted. If that’s true then we have a real problem.”
The minister treaded cautiously in suggesting that apart from resorting to even more cutbacks, increasing revenues may also be entertained.
“Government needs about 450 million guilders to operate at a reasonable level, to operate at a top level we need 500 million guilders. The Council of Ministers has enough decisions that will have to be made as far as these issues are concerned…and what other revenues can be had. If we are talking about increasing revenue, it has to be structurally. If we have to increase revenues, we’ll find measures.”
Tuitt lashed at the Receiver’s Office for its collection policy. He relied on his experience as a business owner saying that tax compliance would be more profitable if the Receivers were to approach it from a “common sense and business acumen” perspective.
“The Receiver in law has its own authority. However what the Receiver has to realize is that government itself has a responsibility. So I am of the opinion that the way the Receiver is collecting is not the optimal way. It’s proven that is you try to collect old debts you will not collect them. You’re only wasting time and the Receiver does not want to understand this. My philosophy is if government only concentrates on collecting on the last five years, we are going to collect more money than we are collecting now. I guarantee that because it’s proven in business. So if I have to get the Council of Ministers to adapt that for policy, because we are also busy with a legal way of writing off old debt, to get the Receiver only to work with new amounts, that process is in full operation so that should happen soon.”
The Finance Minister also made a special appeal for all registered businesses to start paying taxes. He could not say what the current compliance rate is.
“If every company on St.Maarten pays at least some of the taxes that they have to pay, the government will have more than enough money to cover the expenditures. It’s just a matter of compliance, so instead of only concentrating on the people who are paying taxes, let’s concentrate on those who are not paying.”
The Tax Office is also synchronizing its files with the registry of the St. Maarten Chamber of Commerce, to see which registered companies are not paying their fair share once they are operational.
In order to find the 30 million shortfalls, Tuitt indicated that before taxes are raised other avenues such as casino fees, the so-called condo tax and dividends from government owned companies could be explored.
“I spoke to some casinos that have debt with the island and one of them for sure is a technical issue which is supposed to be resolved soon. Once it is resolved the payment will take place. There are certain other withdrawals that we are expecting but since one of the cases will become a legal case, I won’t talk about it.”
When asked how many court cases were ongoing across the seven ministries and how much this is causing government per year in terms of expenditure, Tuitt responded: “Our legal counsel has been requested to make a list of all of our legal cases – the ones that are ongoing and the ones that government lost; we are supposed to get a list.”
Tuitt maintains that taxing private condo owners is a big issue but the previous administration’s expectations were not realistic.
“What the tax office did was to assess these individuals going back five years. The prior government had budgeted 20 million guilders to get from this process and they only collect 30 thousand guilders or something to that effect because the individuals protested. Realistically, I think based on estimates if things go our way we might collect about 600 thousand guilders. It’s a process that has started and it will yield the fruits in the coming years.”
“A third party consultant is right now drafting the dividend policy for government and once we get the policy drafted there will be a second follow up to that where each government company’s balance sheet will be looked at and see how much that company could afford based on the profit that they are making and how much dividend they could pay. Once we agree with those companies then we will have a dividend policy in place and how much payments we expect from those companies on a yearly basis. That will improve our revenues on a yearly basis with government owned companies. But we do get dividends from some companies and concessions as well,” Tuitt explained.
The government’s draft budget that should be finished by the end of this month will show a deficit of at least 30 million guilders, Tuitt concluded.

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